Western PA Firm's Handling Of Ventilator Contract Attracts Congressional Scrutiny

May 8, 2020

As the U.S. races to produce protective and medical equipment to combat the coronavirus, a western Pennsylvania company that makes ventilators has come under scrutiny – and now faces a Congressional investigation – for its potential role in the shortage. 

Before the pandemic, Murrysville-based Philips Respironics received a federal grant to develop a low-cost ventilator for use in national emergencies, according to reporting by online news outlet ProPublica. After the design of the ventilator, called the Trilogy Evo Universal, was approved in 2019, the federal Department of Health and Human Services ordered 10,000 of them for a national stockpile, at $3,280 each. 

But instead of fulfilling that order, ProPublica reported, Philips began selling more expensive versions of the same ventilator overseas. A spokesperson for the company told the news outlet in April that the contract permitted Philips to prioritize commercial versions of the ventilator, and that it had no plan to begin production this year.

As the pandemic wears on, Philips says its timeline has shifted.

“In view of the current crisis, we are working closely with HHS to accelerate delivery of 10,000 Trilogy Universal units to the Strategic National Stockpile,” spokesperson Steve Klink said in an email. 

But an HHS spokesperson told WESA that they have yet to receive any ventilators from Philips. 

The coronavirus can cause an array of symptoms, including shortness of breath, coughing, and fever. For patients in serious condition, ventilators can be vital to survival. In places like western Pennsylvania, social-distancing has arrested the spread of the disease, and the demand for ventilators has not outstripped the supply of machines. But there has been persistent anxiety over the lack of capacity.

“I knew that every person who needed a ventilator and didn’t get one would die,” said Trump said in an April press conference, talking about states’ needs.

Faced with the prospect of ventilator shortages, the Trump administration turned to Philips once more. In April, HHS announced a $646.7 million contract for Philips to manufacture 2,500 ventilators by the end of May, and a total of 43,000 ventilators by the end of the year. 

“We are actively collaborating with the U.S. government to help save lives in the U.S. and across the globe,” said Frans van Houten, CEO of Royal Philips, the parent company of Philips Respironics, in a press release.

The administration said the contract was signed under the Defense Production Act, which authorizes the president to require businesses to prioritize contracts that are vital for national defense.

“President Trump’s bold use of the Defense Production Act is activating America’s industrial base to produce the medical equipment we need to combat the coronavirus,” said HHS Sec. Alex Azar after the contract was announced. 

Under the new contract – which, according to ProPublica, was negotiated in part by President Trump’s son-in-law Jared Kushner – the U.S. government is paying $15,039 per ventilator. That’s nearly five times the price the government was to pay for the ventilators it initially ordered. 

The price, and the delay in production, has prompted an investigation by the U.S. House Committee on Oversight and Reform.

“The taxpayers end up paying a lot, lot more for something they should have been buying for a lot less and should have been getting a lot sooner,” said U.S. Rep. Raja Krishnamoorthi (D-IL), chair of the House subcommittee that will lead the inquiry.

Krishnamoorthi said the company is selling high-cost ventilators – based on taxpayer-funded technology –when it was contracted by the taxpayers to provide low-cost ventilators for an emergency. He believes the Trump administration should use the Defense Production Act to require Philips to move up production of the low-cost ventilators, and to negotiate a better price for taxpayers. 

Trump has defended the deal.

“These are high-quality ventilators,” he said one week after the Philips contract was announced. “We had a choice: We could do inexpensive, less productive ventilators or high quality. We’ve done a high-quality ventilator.” 

“That’s not how most Americans think about things -- that something is better because it costs more,” Krishnamoorthi said. “I think that Americans want a low-cost ventilator to keep people alive, and they want to be able to buy a lot of them because unfortunately there are a lot of hot spots” where the disease is spreading.

Krishnamoorthi said he understood why Philips got the contract. “It makes sense to go to them and say, ‘Hey, we gave you all this money to develop a low-cost ventilator for a pandemic emergency situation. Well, guess what? We’re in that situation. We’d like to contract with you to produce those ventilators.’”

But the Congressman said many questions remain unanswered about why Americans are paying five times the original price for each machine. “That sounds fishy to me.”